Financier Bogeys the St Jude Tournament
March 15, 2009 Mark Hrywna
The Stanford St. Jude Championship has been played under a variety of names since it began 50 years ago and it could have another this year. Sir R. Allen Stanford, chairman and founder of Stanford Financial Group, was charged with fraud last month, along with other executives of the firm.
The Stanford Group has sponsored the Professional Golfers Association (PGA) tournament the past two years after signing a 10-year contract in 2006. “The PGA has assured St. Jude that there will be a June tournament but we don’t know who the sponsor will be at this point,” said Jerry Chipman, a spokesman for ALSAC/St. Jude Children’s Research Hospital.
Phil Cannon, tournament director of the Stanford St. Jude Championship, intends to host the annual PGA tour stop in Memphis in June, but the sponsorship is still up in the air. “We’re trying to determine the implications of the news on the sponsorship,” he said.
The Securities and Exchange Commission (SEC) filed a 25-page fraud complaint in federal court in Dallas against Stanford and other executives at Stanford Financial Group Inc. The SEC alleges that Stanford orchestrated an investment scheme involving $8 billion in certificates of deposit. Stanford’s assets, along with those of three of his companies, have been frozen, according to published reports, after the SEC raided company offices.
The golf tournament is scheduled for June 11-14 at TPC Southwind. Started as the Memphis Open in 1958 to benefit several local charities, the event became the Danny Thomas Memphis Classic in 1970 when St. Jude was designated the sole beneficiary. Almost $22 million has been raised for the Memphis-based hospital since 1970, including $2.5 million and $1.5 million in each of the past two years under Stanford’s sponsorship.
How Stanford’s arrest and the frozen assets will affect the event and charity is still an unknown factor. “As far as I know, I don’t think there’s been any discussion between our organizations and Stanford since this happened,” Chipman said, one day after the charges were announced. “You’re moving into territory now that’s premature for us to answer. I think you’re starting to ask questions that we don’t have an answer for yet,” he said.
Every city that hosts PGA tournament, usually has a nonprofit organization that in essence owns and operates the tournament, such as a Jaycees or Rotary Club, Cannon said. In this case, the organization is called Children’s Champions for Hope (CCH), a nonprofit created specifically to run the tour event in Memphis. “That’s its only mission, to run the tournament and raise money,” Cannon said.
CCH has a contract with the PGA to host the event as well as a three-party agreement that includes the sponsor, Cannon said. “It’s a model that you will see in every city,” he said. “Any relationship with St. Jude from the PGA tour and from CCH to my knowledge, is just a handshake agreement. I’m not aware of any relationship with Stanford,” Cannon said.
The PGA facilitates these contracts and its legal and marketing team finds and identifies title sponsors, connecting them with a local organization that will benefit. “In our case, we have a handshake agreement to donate all the profits to the hospital,” Cannon said, in addition to using any marketing opportunities to raise awareness for the hospital and the cause.
The primary fundraising umbrella is the Eagles for St. Jude program, in which Stanford Financial has a commitment to donate $1,000 to the hospital for each eagle scored on the PGA Tour throughout the year. Last year, the program raised about $2.5 million and $1.5 million in 2006.
“As partner with St. Jude, we get their blessing on many aspects of conducting the tournament,” Cannon said, but the organization does not have a say in who the sponsor is or ability to approve or disapprove.
Stanford’s companies include Antiguan-based Stanford International Bank (SIB), Houston-based broker-dealer and investment adviser Stanford Group Company (SGC), and investment adviser Stanford Capital Management. The SEC also charged SIB Chief Financial Officer James Davis, as well as Laura Pendergest-Holt, chief investment officer of Stanford Financial Group (SFG).
According to the complaint, SIB is operated by a close circle of Stanford’s family and friends. Its investment committee is comprised of Stanford; Stanford’s father who resides in Mexia, Texas; another Mexia resident with business experience in cattle ranching and car sales; Pendergest-Holt, who prior to joining SFG had no financial services or securities industry experience; and Davis, who was Stanford’s roommate at Baylor University. NPT